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Sunday, 24 March 2013

Australian business response to carbon price: "Wut?"

Since Tony Abbott has finally published something substantial in regard to his plans post-September, should the Coalition win the election, we can get down to examining what that would mean for Australia. In the Plan Abbott returns again and again to the carbon price instituted in July 2012, and that the ALP would convert to a full emissions trading scheme next year if they win in Sept. Abbott refers to the carbon price when talking about small business, for example, and for families as well. As if it were a real concern for those parts of the community. I'm not going to talk about the impact of the carbon price on electricity and gas prices - I've written about gas before and others have written about electricity (here and here) and the overwhelming bulk of the increases we've seen (and are yet to see) have nothing whatsoever to do with the carbon price - but instead I want to look at how business has reacted to it.

The first thing to notice, even without talking to anyone, is the stock market. Talking to people? It would be so easy to get on the phone, if you worked for Rupe's Australian, and chat with a CEO or two about how they hate the carbon price. Of course they're going to bag it. But look at how their companies have actually performed since its introduction. This is a grab from the ASX chart easily available on Fairfax's websites.

Since the introduction of the carbon price the All Ordinaries has risen from about 4100 to about 5000. There was an incredible period from mid-November to mid-February when the stock market enjoyed an uninterrupted lift, adding to the personal wealth of millions of Australians. There's nothing here to suggest the carbon price was a burden. The drop at the end of May was due to the Greek election, so it was political. In November there was another drop when the US election was quickly followed by a fiscal stalemate in Congress that upset investors. Again, political. Then last week there was another slip due to the Cyprus debt crisis. All of these drops have been due to political problems resolving issues of sovereign debt stemming directly from the GFC, which was a Conservative disease we are still recovering from. Australian companies have been blithely moving ahead in leaps and bounds despite the carbon price.

Now let's look at another point that Abbott raises in his Plan: high-tech manufacturing. With a high dollar it's difficult for Australian manufacturers to compete in overseas markets for commodity-like deliverables. But given the right signals, Australian companies can achieve supremacy in specific niche areas. The carbon price can act as that signal, and work to ensure thousands of highly-paid jobs for Australian workers making things that are not economical to make in other countries.

Fuel-from-algae processing plants is one of these areas. Look at tiny, Perth-based Algae.Tec, for example. This little battler of a company has pushed the boundaries. Its modular processing units are purchased by companies that emit carbon, attached to the emissions point, and the algae converts the carbon into biomass which is then chemically converted into fuel. Without a carbon price it's very difficult for Algae-Tec to sell its units to emitters. The company is listed in Australia and in Europe, has established partnerships and joint ventures, and is building plants right now in a number of countries. This could become a major exporter for Australia, and employ hundreds or even more people in this country. Abbott wants to stop this happening.

Another company that is making a mark in green high-tech manufacturing is Silex Systems, a solar power plant maker. It's another little battler of a company and is using patented technologies developed in Australia. Its first solar power plant is under construction in Mildura and it has the capacity in Melbourne to manufacture more plants, if given the opportunity. Hundreds, even thousands, of workers receiving top salaries could be employed by Silex to make the state-of-the-art power plants that the whole world needs and wants. It's a success story waiting to happen but Abbott wants to strangle the pipeline of jobs and slow down the company's growth.

Big business just yawns when the carbon price comes up but there are many small, green, high-tech businesses waiting for the opportunity to grow, and they will be watching very closely to see if Abbott succeeds in repealing the carbon price. Very closely indeed.

To anyone that hasn't already read the articles linked to about gas and electricity prices, I suggest doing so. To get a better understanding of the problem of high prices, it helps to see the bigger picture. The scope of what we're told by some politicians and news sources is limited.